Spread betting is a type of wager that incorporates the quality of the competing teams/players into the odds. A spread is a range of outcomes and the bet is whether the outcome will be above or below the spread. In Britain, spread betting is regulated by the Financial Services Authority rather than the Gambling Commission. For punters, this type of wager carries a higher level of risk as gains and losses can be greater than the original stake.
In a sporting event, a strong team is often matched up against a weaker team, creating a favorite and an underdog. The spread is a handicap towards the underdog. The purpose of the spread is to create an equal number of participants on each side of the wager which allows a bookmaker to act as a market maker by accepting wagers on both sides of the spread.
This enables the bookmaker to make a profit no matter the outcome of the event by charging a commission on each transaction (as long as the total amount wagered on each side is roughly equal). Thus, it is critical for bookmakers to price odds accurately or they could sustain massive short-term losses.
If a bookmaker offers a spread of 7.5 points for the favorite team, that team must defeat the underdog by 8 points or more for the bettor to win. Presumably, with this spread, about an even number of gamblers have placed wagers for each side. If the underdog wins the game, or loses by 7 points or less, the bettor will lose.
Spreads are frequently specified in half-point fractions to eliminate the possibility of a tie, known as a push. In the event of a push, the game is considered no action, and no money is won or lost. In order to guarantee their commissions, bookmakers often create options such as “ties win” or “ties lose” to avoid the necessity of refunding every bet.